New 10-year bond issue due

Greece is likely to make its 2023 market debut on Tuesday with a syndicated issue of a new 10-year bond, in the context of the front-heavy strategy by the Public Debt Management Agency, in view of the further interest rate increases expected by the European Central Bank, but also general elections, which may cause market volatility and instability.

Greece follows a number of eurozone peers that have made market forays this month, with analysts estimating that 40-50% of all this year’s issues will take place in the first half of the year.

The issuance process has been undertaken by six international banks, Barclays, BofA Securities, Commerzbank, Goldman Sachs, JP Morgan and Societe Generale, while the new bond will expire on June 15, 2033.

The goal is to raise 2-2.5 billion euros, with the final amount being formed depending on the offers investors will submit, given that at the end of the month, Greek bonds amounting to €4 billion expire. However, Greece does not need to raise large amounts, as borrowing from the markets for the whole year  has been set at €7 billion – or €8 billion if a “green” bond is also issued.

As far as the interest rate is concerned, this is placed at 4.6-4.7% (compared to 4.15% that the yield of the existing 10-year Greek note reached on Monday) – i.e. approximately 185-195 basis points above the average swap of the euro, which amounts to 2.75%. However, the real cost to the Greek state will be below 3%, thanks to the portfolio management strategy that PDMA has implemented, managing to overcompensate the interest rate risk. It is worth noting that debt financing needs are estimated to be 10% of GDP this year (from around 15% in 2022) and will subsequently decrease significantly further.

PDMA considers there is no reason for Greece to wait any longer to tap the markets, despite the fact that the first assessment of the country for 2023 by the Fitch house is expected at the end of the month, with analysts not ruling out an upgrade which would improve the image of Greek bonds and even trigger a second market foray.